11th May 2014 by Jonathan Davis
The above is the index of the US $ against a basket of currencies, such as € (c 58% of index), £, CAN$, CHF (Swiss Franc) and Japanese ¥ and (strangely) Swedish Krona.
As you can see the US$ was in confirmed uptrend from the all time low in 2011 to last Summer (red diagonal line indicates).
However, since last Summer the $ has fallen to the White horizontal support line. This has been support – from where it bounced several times – during the last 2 years.
Curiously, the $ rose sharply on Thursday and Friday just gone. Is the bounce sustainable?
As Sterling based investors what has this meant for the $ : £ relationship?
As far as we can see the media says the £ has been strong because the UK has higher growth right now than the US.
Maybe. More likely, it is because the US$ has been weak, rather than the £ has been strong.
So, if you ask me where is the £ v $ going? I cannot say. What I can say is the following:
1. The US $ is sitting, right now, at multi year support from which it has bounced several times.
2. The £ : $ shows a weekly bar (candle in the jargon) last week which showed the £ rose strongly but ended the week on a low, near where it started the week. Such a candle, with a top or bottom wick, has previously indicated a change of trend or confirmation of new trend, as shown by the arrows.
3. If the $ breaks below support then that’s probably it – $ dying and £ to rise further.
4. If $ rises again off support then the opposite to #3.
The level of the US$ is normally important to the level of US share prices and global commodity prices.
Nothing in these articles can be taken as financial advice. Neither Jonathan Davis nor Jonathan Davis Wealth Management will be held responsible for action taken or not taken from reading these articles.
Investors should seek bespoke advice before acting.